All Food vs. Regulated Food – Produce Rule

IMPORTANT: This text has been updated to reflect changes in the proposed FSMA rules as of October 2014.

Background

Recognizing that different scales of production and types of supply chains pose varying risks to public health, Congress included a number of provisions in the Food Safety Modernization Act (FSMA) to ensure flexibility and appropriateness for a range of production systems.

In FSMA, Congress included options and modified requirements for smaller farms and facilities that participate in direct-to-consumer supply chains. (A full discussion about the modified requirements for farms is available here, and for facilities, here.) The provisions that established those modified requirements set the threshold for eligibility based on the calculation of an operation’s average annual gross sales of all food in a previous three-year period. That means that when calculating whether a farm or facility qualifies for modified requirements, that the value of all food sold – not just the produce or product regulated – counts towards the threshold.

What is “All Food”?

All food means all food – and that includes everything that can be eaten by humans or animals. Produce, processed foods, dairy, livestock, grain, and other commodities all come under the definition of food. For the purposes of determining eligibility for the modified requirements, whether FDA is counting the value of all food, just produce, or just the regulated product makes a big difference. This is also important for defining small and very small businesses, and for the de minimis exemption for small farms — these three categories are all defined based on a sales threshold.

What is the Issue?

Because the calculation is made based on all food instead of just regulated food, many family farms may not be eligible for the modified requirements and may be subject to the full set of regulations because they gross more than $500,000 in the value of all food sold. Now that the proposed regulations are out in their draft form, many farmers are dealing with the prospect of having to absorb significant costs of compliance and perhaps not being able to make a profit to remain in farming.

Additionally, commodity grain farmers or dairy or livestock producers that may be interested in experimenting and diversifying into produce production to meet demand for local food may come under the full weight of the regulations and therefore decide not to diversify. Those farmers may choose not to grow vegetables to sell at a roadside stand and augment their income during the summer time because the costs of complying with the full set of regulations would eat up any profits from the roadside stand.

The situation is most acute for farmers who may be grossing above $1 million in sales of all food but may be operating at a loss or on a very slim margin.

Focusing the eligibility on regulated foods would address this issue. That would mean that in the Produce Rule, only covered produce would count towards the threshold for eligibility of modified requirements. In the Preventive Controls Rule, only regulated product would count.

All Produce vs. Covered Produce

In the re-proposed sections of the Produce Rule, FDA has revised the approach for determining whether a farm is a small or very small business, or whether a farm qualifies for the “de minimis” exemption. When FDA originally proposed the Produce Rule, it calculated the value for these three categories based on the average annual gross sales of all food. The re-proposed Produce Rule revises this threshold based on sales of all produce sold:

Farms that average no more than $25,000 in annual gross sales of produce are exempt.

Very small businesses are those that average less than $250,000 in annual gross sales of produce.

Small businesses are those that average less than $500,000 in annual gross sales of produce.

In the re-proposal, FDA is asking for public comment on whether they should instead calculate these values based on covered produce instead of total produce.

FDA has not extended this change in the way sales are calculated to those farms that qualify for modified requirements. This change in FDA’s thinking on this issue so far only extends to the definitions of small and very small businesses, and farms that qualify for the de minimis exemption.

FDA Needs to Hear from YOU About Which Foods Are Regulated:

While FDA is bound by certain provisions in FSMA in how it calculates whether a farm or facility is eligible for modified requirements, Congress did give the agency some flexibility. If you are a farmer, FDA needs to hear from you about how it determines and defines who is eligible for exemptions and modified requirements, and who is considered a small or very small business.

Here are some questions to guide your comments to FDA on this issue:

What type of farming operation do you have?

Do you have a variety of income streams from farming?

Do you grow both produce that is covered by the rule and produce that is not covered by the rule?

How will the “all produce” sales threshold affect you?

Would you be able to calculate your sales based on covered produce rather than total produce? How difficult or easy would that be?

Do you gross more than $500,000 in food other than produce or processed food? If yes, do you also grow produce or process food? If no, would you like to diversify into produce or processing?